The Psychology of Pricing your Video Game

It is often said that piracy is the source of revenue loss for video games. There doesn’t appear to be any data to support this but much like circumcision it is, for whatever reason, incredibly popular in the US. Whenever a publisher sees a video game being downloaded they equate that as a lost sale. There are many variables that come into play for this kind of act on the customer side but I would like to posit what I suspect is the biggest culprit.

The price of video games. Now I know you read that and immediately want to remind me that games are cheaper now than they ever have been. That’s cool, even if I’d retort that in my youth I saw people getting maybe one game a season. We played more games by trading between one another. Sure an anecdote of a dozen kids isn’t very good evidence but my entire life has fit that anecdote.

When you price a product you must take into account supply and demand. Most people think of an individual game as the only supply and that this reality means that each game can be uniquely priced at the current market norm. These days that’s around 60 dollars. However I believe that video games should be seen as a whole. If you wish you could be more accurate by separating games by their “A” value. With indie games being in their own market and “AAA” titles being in one together.

Lets say I only have budget for 100 dollars in video games a month. If you price your game at 60 dollars that means you think I will only need your game and something small for the entire month. Maybe this is true? Maybe your game will provide me with an entire month worth of entertainment. But you need to answer that as objectively as you possibly can. I know personally I play a lot of games and the vast majority of them are incredibly small time investments.

It isn’t that the games themselves are short total times. Tetris is technically very short. It is that they lack any replay ability. The content is only interesting a single time. This to me is a recent phenomena (recent as in the last 10 years). It only gets worse with the rise of DLC. Now companies just shrug off that reality and supplement the lack of interesting gameplay with extra content you can pay for.

The best way to get people to buy your game is to price it at a fraction of what you estimate to be the total budget for video games of your target market. This is why steam sales work so well. Why would I spend 60 dollars on a single “ok” game when I could buy 4-6 games for that amount? There are very few games a year that are good enough to confidently market themselves at the maximum estimated value for video games.

This is where revenue is lost. If people can’t pirate the game they are extremely unlikely to buy it anyways. I would hazard that most pirates have a lower threshold for how much they are willing to invest into a single game. The psychology of pricing video games needs to be reworked.